There are a million ways to the truth in money management and no such thing as the pure way. And if you're raising children and facing serious tuition prospects, here are a few guidelines I follow in advising parents.

Of course, college education today can cost as much as $30,000 annually. And that's before you buy a book, much less the computer-related outlays. If you get into private education earlier, at the high school level, the costs are mind-boggling. Boarding schools, like Middlesex, in Concord, Massachusetts, can charge more than $24,000 a year. And because many parents insist that Junior and Missy start the fast track even earlier, preschool and private grammar schools can set you back $10,000 a year.

I believe that a three-pronged approach is efficient and practical.

Start with the U.S. Treasury zero coupon bonds. These bonds pay no interest in cash. You buy them at a discount, say, 30 cents on the dollar. They mature at face value in a specified time frame. This way you can target maturities to match your requirements: so much coming due to coincide with freshman year in college, sophomore year, and so on. The rates are guaranteed by the government at time of purchase.

Currently, money doubles in these instruments in 11 years so that $5,000 automatically becomes $10,000 in May, 2010. This works out to be about 5.9 percent annually. Not so hot, you say? Perhaps, but it makes sure that part of the tuition is taken care of automatically, and you don't have to suffer through the sometimes (believe it or not) negative bias of stock markets. Peace of mind means more than anything else in financial planning; there should be a conservative part to this process. And that means zero coupon bonds.

Second, periodically purchase a good growth mutual fund. Monies should probably be systematically added to the fund so that you can take advantage of dollar cost averaging (putting similar amounts in annually, often when prices are lower and more shares can be bought). Any financial consultant can give you long term records of all the mutual funds. The earlier in a child's life you start this program, the better it will work. Over time, this part of the plan is designed to grow in value faster than the zero coupons, but with more risk.

Third, own shares in a stake-in-life company. This involves foresight and originality as well as patience and discipline because to justify buying shares in one company over time, even in small amounts, you must feel (or your advisor feels) that it can have dynamic growth over a 20-year period.

Imagine if you had done this over the last 20 years with Coca Cola, General Electric, or Gillette. Perhaps your company will be Microsoft or Intel, if you believe in them enough. I'd bet on Lucent Technologies, myself. The former telecommunications equipment side of the old AT&T, Lucent also owns Bell Laboratories, arguably the greatest research facility in the world, keep buying your stake in life company and pray for bad markets periodically, when you can buy shares cheaper. Obviously an Internet company would fill the bill here. But you better make sure you're confident of the survival of the one you pick.

Put your plan into action—the earlier, the better. Invest at the same time each year, like a child's birthday, or during the holidays. It makes it simpler to remember and become automatic. Paying for your child's education will become remarkably painless, and if you pick the right stake-in-life company, your child could end up richer than you. Isn't that what every parent dreams? My daughter the doctor.

The simplest form of an account for children is the custodian account. It is as easy to open as knowing the child's name and having a Social Security number. Every state has it own uniform gifts act, and it is one of the few legal adventures you can perform yourself, without the use of a lawyer.

I advise parents to start a custodian account at the earliest possible moment in the child's life. If things are tight for you, push the grandparent button. Do not, as the child grows older, ever tell your child what funds are accruing for him or her. Resist treating your children as “little adults” and revealing all to them at an early age. Trust me, they cannot handle it. And they are best served thinking they have to go out and create their own wealth.

When I got my first car my sophomore year in college, I was washing it one day in the driveway, and my father came out to watch. I don't know what possessed me, but I looked at him and said, “Out of your clutches, my lord.”

My father went into orbit. I apologized. But “wheels” definitely meant freedom. And if I had come into possession of a custodial account at that time, I would have been driving a Corvette.

I have friends who have kept their children's custodial accounts until the kids turn 30. My friend Max is one.

“Why 30?” I asked.

“Because,” Max explained, “by 30, we all have taken some hits in life. We've had failures and disappointments, and perhaps we've learned from them. Also, it's the age when maybe they're getting married, or buying a condo, or starting a business. They're not so likely to blow it on a Porsche. But at 30, if they do blow it, they possibly deserve it. Before then, they just don't have enough history.”

The 1997 tax reform legislation has provided for a so-called Education IRA. Parents can contribute up to $500 annually to a plan for each child under 18 that can grow tax free and be distributed tax free for the purpose of higher education. There are restrictions on the Education IRA that you should check with a financial advisor. The restrictions do not allow contributions from individuals with adjusted gross income of more than $95,000, or from couples who make more than $150,000.

Max out on the custodial accounts, and trust in the kindness of strangers—that is, the friends, relatives, and other people who interact with your kids. PE

John D. Spooner is a Senior VP of Salomon Smith Barney, Inc. and author of Do You Want to Make Money or Would You Rather Fool Around?

ACTION: Develop a financial plan to help defray the costs of your children's education.